Phlight Restaurant is considering a delivery service. The firm expects that sales from the new service will be$150,000 per year. Phlight currently offers a sit-down service with annual sales of $100,000. While many of thedelivery sales will be to new customers, Phlight estimates that 60% of their current sit-down customers will switchand use the delivery service. The level of incremental sales associated with introducing the delivery service isclosest to:Select one:a. $90,000b. $150,000c. $60,000d. $120,000

Sales from New Service = $150,000Current Delivery Service sales = $100,000Estimated shift from…

Answered: Phlight Restaurant is considering a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Bubbly Waters currently sells 440 Class A spas, 590 Class spas, and 340 deluxe modeſ spas each year. The firm is considering adding a mid-class spa and expects that if it does, it can sell 515 units per year. However, the new spa is added, Class A sales are expected to decline to 295 units while the Class C sales are expected to increase to 615. The sales of the deluxe model will not be affected. Class A spas sell for an average of $14,700 each. Class C spas are priced at $7,400 and the deluxe models sell for $18,400 each. The new mid-range spa sell for $9,400. What annual sales figure should you use in your analysis?
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Meyerson's Bakery is considering the addition of a new line of pies to its product offerings. It is expected that each pie will sell for $15 and the variable costs per pie will be $9. Total fixed operating costs are expected to be $25,000. Meyerson's faces a marginal tax rate of 35%, will have interest expense associated with this line of $3,500, and expects to sell about 4,200 pies in the first year. a. Create an income statement for the pie line's first year. Is the line expected to be profitable? b. Calculate the operating break-even point in both units and dollars. How many pies would Meyerson's need to sell in order to achieve EBIT of $20,000? C. d. Use the Goal Seek tool to determine the selling price per pie that would allow Meyerson's to break even in terms of its net income. e. Calculate the DOL, DFL, and DCL for the new pie line.
A furniture's store is considering tow marketing strategies: a loyalty program that would cost $3,000 and increase revenue by $15,000, or a seasonal sale that would cost $5,000 and increase revenue by $25,000. The store's contribution margin is 30%. Which strategy should they pursue if the goal is to maximize ROMI? What about if the goal is to maximize revenue growth?
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K Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $24 million per year. While many of these sales will be to new customers, Pisa Pizza estimates that 30% will come from customers who switch to the new, healthier pizza instead of buying the original version. a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? b. Suppose that 40% of the customers who will switch from Pisa Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case? a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? The…
Use the following information to answer questions 19 through 30: Currently, OET Corporation sells 350,000 units of widgets a month at a price of $21 a unit. The company currently has a net 30 credit policy. Mr. Ent, the company's financial manager, is evaluating a new credit policy of net 60 for the company. The marketing manager thinks that sales would increase by 10,000 units per month if the company were to switch to the new credit policy. The APR for OET is 13% compounded monthly, and its variable cost per widget is $12. Ignore taxes. Tomorrow, Mr. Ent will be making a presentation on the new proposed credit policy to the CEO of OET. He will be expected to provide answers to the following questions Describe how you would calculate the net present value of the proposed credit policy switch.
Question: The Savannah Shirt Company is considering adding a new product line, a cloth shopping bag with custom screen printing that will be sold to grocery stores. If the current market price of cloth shopping bags is $1.25 and the company desires a net profit of 40%, what is the target cost? The company estimates the full product cost of the cloth bags will be $0.60. Should the company manufacture the cloth bags? Why or why not?
ABC Co is considering the launch of a new widget. If the product goes directly to the market, there is a 60% chance of success. For $500,000, the manager can conduct a focus group to increase the probability of success to 65%. Alternatively, the manager can pay a consulting firm $750,000 to research the market and refine the product. The consulting firm successfully launches new products 70% of the time. If the firm successfully launches the widget, the payoff will be $8 million. If the product is a failure, the NPV is $0. Calculate the expected NPV if the managers go directly to the market.
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A chain of take-away pizza stores is considering introducing a new line of gluten-free pizzas. Net revenue from the new line of pizzas is expected to total $500,000 per year, but 15% of this net revenue is forecast to consist of people switching from the regular pizzas to the gluten-free pizzas. How would you describe this situation in terms of the NPV analysis upon which the situation will be based. Question 1Answer a. There is a negative externality equal to $425,000 which should be included in the NPV analysis for the gluten-free pizza project. b. There is a positive externality equal to $425,000 which should be included in the NPV analysis for the gluten-free pizza project. c. There is a positive externality equal to $75,000 which should be included in the NPV analysis for the gluten-free pizza project. d. There is a negative externality equal to $75,000 which should be included in the NPV analysis for the gluten-free pizza project.

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